Could The Kinetic Mines and Energy Limited (HKG:1277) Ownership Structure Tell Us Something Useful?

Every investor in Kinetic Mines and Energy Limited (HKG:1277) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.

Kinetic Mines and Energy is not a large company by global standards. It has a market capitalization of HK$3.2b, which means it wouldn’t have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutional investors have not yet purchased shares. Let’s delve deeper into each type of owner, to discover more about Kinetic Mines and Energy.

View our latest analysis for Kinetic Mines and Energy

SEHK:1277 Ownership Summary, February 9th 2020
SEHK:1277 Ownership Summary, February 9th 2020

What Does The Lack Of Institutional Ownership Tell Us About Kinetic Mines and Energy?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it’s unusual to see larger companies without any institutional investors.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don’t attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. Alternatively, there might be something about the company that has kept institutional investors away. Kinetic Mines and Energy’s earnings and revenue track record (below) may not be compelling to institutional investors — or they simply might not have looked at the business closely.

SEHK:1277 Income Statement, February 9th 2020
SEHK:1277 Income Statement, February 9th 2020

Hedge funds don’t have many shares in Kinetic Mines and Energy. From our data, we infer that the largest shareholder is Liang Zhang (who also holds the title of Senior Key Executive) with 63% of shares outstanding. Its usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we’re glad to see a company insider play the role of a key stakeholder. The second and third largest shareholders are Li Zhang and Hui Xue, holding 11% and 0.05%, respectively. They also hold the titles of Top Key Executive and Member of the Board of Directors, respectively. This once again signifies considerable insider ownership amongst the company’s top shareholders.

Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be achieved by studying analyst sentiments. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Kinetic Mines and Energy

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

It seems that insiders own more than half the Kinetic Mines and Energy Limited stock. This gives them a lot of power. So they have a HK$2.4b stake in this HK$3.2b business. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

The general public holds a 26% stake in 1277. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we’ve spotted 1 warning sign for Kinetic Mines and Energy you should know about.

If you would prefer check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, backed by strong financial data.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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